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The U.S. Department of Commerce imposed new tariffs on solar panels imported from China today, in response to claims that the Chinese government is unfairly subsidizing its solar panel makers’ exports.

The claims alleges that China is engaged in unfair trade practices, such as granting subsidies in the form of low-interest loans in a way that affects exports. To make up for these subsidies, the companies requested tariffs that would more than double the price of solar panels imported from China. The tariffs announced today were small in comparison: between 2.9 percent and 4.73 percent. But stiffer tariffs may be levied in May, when the Department of Commerce announces a decision on a second part of the trade case.

A flood of low-price Chinese solar panels, which helped drive down overall prices for solar panels by 50 percent over the last year, has hurt U.S. solar panel manufacturers, some of which went bankrupt last year because they couldn’t compete. This has drawn attention to China’s policy and fueled broader criticism of China’s trade practices.

But the real story is more complicated. For one thing, cheap Chinese panels have been a boon to installers of solar panels in the United States. In 2011, solar panel installations doubled in the U.S., driven in large part by a plentiful supply of cheap solar panels made in China. Because installation companies employ large numbers of people, China’s policy may have actually helped the U.S. solar industry, at least in the short term.

The small tariffs imposed today aren’t expected to have a big effect, but large tariffs could slow the growth of solar installations in the U.S. and hurt solar installers. A recent study by the Brattle Group estimated that tariffs of 50 percent to 100 percent would increase prices for solar panels—relative to what they were expected to be—by 25 percent to 30 percent over the next two to three years, and eliminate thousands of potential installation jobs in the United States.

The precise effect that tariffs could have on panel prices is hard to determine because there is more than enough supply worldwide to make up for a loss of solar panels from China, says Shayle Kann, managing director for solar at GTM Research. “It’s possible that you would see prices flatten out in the U.S. while they otherwise would have gone down,” he says. “There might be a slight increase. But it’s hard to call.”

Still, Kann says, tariffs could be “disruptive.” Between 40 percent and 50 percent of planned solar installations in the U.S. were going to use solar panels from China. “If you impose an import tariff on something like 50 percent of the market, you’re going to have a substantial impact,” he says. “There’s no way to avoid that.”

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Tagged: Energy, solar, China

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